Many people live in single income households or households in which one spouse’s income and Social Security retirement benefit is dramatically less than the other’s. It’s generally accepted that the higher earner in the household should delay claiming Social Security retirement benefits. Visit “Benefits for Spouses” at SSA.gov to estimate spousal benefits from Social Security.
However, in some households, the higher earner’s decision to claim retirement benefits until FRA or up to age 70 and claim early retirement for the lower wage earner when his or her benefit is at or near zero dollars per month may require a second analysis. If the lower earning spouse worked less than the required 40 quarters or had limited experience in the workforce, the split-retirement claiming strategy might not work well if the lower wage earner plans to rely mostly or totally on the higher earner’s Social Security benefits. If the household must wait until the higher earner turns 70, the lower earner won’t receive benefits in the interim or gain credits by the decision to delay.
Significant Earnings Gap between Social Security Benefits
Frederick and Kelly are married. Frederick has always been the household’s primary wage earner. Kelly is a stay-at-home mother. They’re both 66 years old and at FRA:
Frederick estimates that he is eligible for a Social Security retirement benefit of about USD 2,200 a month.
Kelly isn’t eligible for Social Security retirement benefits based on her personal earnings record.
Frederick learns that Kelly is eligible for a spousal benefit of 50 percent of his monthly Social Security retirement benefit. However, she isn’t entitled to claim until Frederick claims Social Security benefits.
If Frederick waits until he turns 70 to maximize his retirement benefits, he will also maximize Kelly’s potential survivor benefits if he dies before her.
However, Kelly must now wait four years to earn the spousal benefit. She won’t receive any benefit for waiting to claim the spousal benefit past FRA.
In this example, Frederick’s decision to delaying claiming Social Security retirement adds an eight percent credit per year to the estimated USD 2,200 monthly benefit. However, because Frederick and Kelly lose USD 3,300 in the meantime, it may be a better choice for claim retirement benefits for both at FRA:
The higher earner’s decision to delay Social Security retirement benefits also increases the couple’s break-even period. It also lessens the value of the higher earner’s decision to delay claiming Social Security benefits.
This type of challenge may also result when the lower earner’s Social Security benefit is significantly less than the larger earner’s benefit. The lower benefit can be any amount over zero.
For instance, let’s imagine that Kelly earned enough Social Security credits over the years to qualify for a USD 800 per month retirement benefit:
If Frederick decides to delay claiming Social Security retirement benefits to age 70, Kelly can still request her personal Social Security retirement benefits at FRA.
Kelly won’t be able to claim against Frederick’s earnings that make her eligible for about USD 1,100 per month in spousal benefits. She loses out on USD 300 a month because Frederick hasn’t applied for his Social Security retirement benefits yet.
Because Frederick has decided to delay his Social Security retirement benefits another four years, the couple’s break-even period increases.
For each year that Frederick delays Social Security retirement benefits, he earns an additional eight percent per year on his estimated USD 2,200 per month benefit.
However, the combined household of Frederick and Kelly loses USD 2,200 a month (Frederick’s estimated benefit) and USD 300 month (the difference between Kelly’s personal retirement benefit and the spousal benefit she is eligible for), or a total of USD 2,500 per month.
When to Claim Social Security Retirement Benefits
If Kelly were considerably younger than Frederick and had earned work credits in her own Social Security account, Frederick’s decision to delay claiming Social Security retirement income might not matter as much. By the time he reached age 70, she wouldn’t be eligible for Social Security retirement anyway.
Now let’s imagine that Kelly is five years younger than Frederick. He reaches FRA at age 66 and Kelly is 61 years old. She’s isn’t eligible for a spousal benefit on Frederick’s record and she’s still earning money as an employee. Frederick’s decision to delay claiming retirement benefits from Social Security makes more sense in this scenario. When Frederick celebrates his 70th birthday, Kelly will be 65. She won’t be at FRA. In addition, the decision to wait to claim a spousal benefit can help Kelly. She will avoid an early benefit penalty in that case.
The above examples illustrate some of the challenges single income households and others face concerning when to claim Social Security retirement benefits. Contact Social Security’s general help line to ask questions or request resources at 800-772-1213.